Growing popularity of virtual biotechs promises boon to outsourcers

The recent news that tiny FerroKin BioSciences earned a big buyout deal with Shire ($SHPGY) has helped spotlight the growing popularity of the virtual biotech model. And that has big implications for everyone in the outsourcing industry.

Like other virtuals--such as Stromedix, recently acquired by Biogen Idec ($BIIB)--FerroKin had only a handful of employees working full-time for the company. CROs, CMOs and other outsourcers created a network of support vendors that carried out much of the heavy lifting in drug research. And with some proof of concept data in hand, FerroKin made a tantalizing morsel for an acquirer looking to build up its pipeline without having to acquire a sizable research infrastructure it didn't need.

There's little doubt that a number of venture companies are behind this trend, as several made clear to me at BIO-Europe Spring in Amsterdam earlier this week. Investors like CMEA, Index and others believe that virtual companies can quickly accelerate a drug program to PoC, giving them a chance to cash out relatively quickly with a sale to Big Pharma. And the trend hasn't escaped the attention of the outsourcing industry as a whole.

"There's a herd mentality. If there's a string of successes, then the herd will follow," says Celtic Pharma's lead counsel Allan Cohen, according to a story in Outsourcing-Pharma.

- here's the story from Outsourcing-Pharma